Tomahawk, WI 03/21/2014 (Basicsmedia) – After spending $130 billion to buy out the 45% stake of Vodafone Group Plc (ADR) (NASDAQ:VOD) in Verizon Wireless, Verizon Communications (NYSE:VZ) next needs to worry about domestic competition from smaller rivals such as T-Mobile US Inc (NYSE:TMUS).

With this transaction, Verizon’s debt has increased to about $110 billion and it expects consolidated revenue of $125.4 billion in FY2014.

Price wars

T-Mobile’s price cutting in its continuing battle with AT&T Inc. (NYSE:T) has had an effect on Verizon as well. While Verizon has not resorted to cutting prices, it started new plans called More Everything which will offer more mobile data download limits and free international messaging.

Verizon’s Edge program subscribers will get $10 discount on their monthly plans if their data plans are eight gigabytes or less. Those with plans of 10 gigabytes or more will get $20 off. Verizon’s family plan still remains more expensive at $180 compared to $160 on AT&T and $140 on T-Mobile.

Verizon is able to command a premium as has the best network coverage.

With all this ongoing competition to attract customers, Vodafone Group Plc (ADR) (NASDAQ:VOD) has managed to add more monthly subscribers than T-Mobile over the past three quarters. T-Mobile though claims that it is gaining more customers from Verizon than it is losing.

Share Price Outlook

Among the factors that could affect Verizon and its share price include:

  • The broader economic outlook; if the GDP growth stalls, people may opt out of expensive wireless plans.
  • Verizon may lose customers to cheaper data plans from T-Mobile and AT&T.
  • Google may enter the broadband internet industry which may adversely affect Verizon.

However, the average price target for the stock of Vodafone Group Plc (ADR) (NASDAQ:VOD) is $54, according to Yahoo Finance. Therefore, the stock is still trading at a discount of about 11% from the average price target. With a strong cash flow situation as of now, the stock price is likely to improve.

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